The Impact of Retail Investors on Litecoin and Stablecoins
Litecoin
We are in the middle of the bull market. The retail investors are arriving. Please note that this letter is not intended as financial advice.
Source: https://bitcoinuncharted.substack.com/p/uncharted-3
Institutional buyers as Tesla and others bring confidence to new retail investors. The latter have greater influence in altcoin prices than institutional buyers that prefer mainly BTC. In the middle and end phase of this bull market, under retail investors' influence, Litecoin may flourish.
The hypothesis is that Litecoin will increase in value as new retail investors come. Bitcoin and Ethereum network get crowded with the new participants and the result is higher transaction fees.
Source: https://bitinfocharts.com/comparison/transactionfees-btc-eth-ltc.html#1y
We can already see these high fees resulting in an increase in transfer volume at Litecoin Network.
Source: Glassnode
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LTC price and transfer volume are very sensitive to the arrival of retail investors and euphoria. It happened in the last bull market. It is worth to note that Litecoin still did not recover its All Time High. Bitcoin and Litecoin will probably reach their top price at the same time.
It is important to observe that Litecoin is one of the safest networks after Bitcoin, as the attacking cost is high.
Source: https://www.crypto51.app/
For all these reasons and hypothesis, IMO, Litecoin deserves a good portion of a crypto portfolio, something between 10 and 50%. I think LTC can outperform BTC in the middle and the end phase of this bull market, as euphoria takes place.
Stablecoins
Other interesting phenomena to observe is the surge of stablecoins. They had a huge increase last year. Marketcap of stablecoins multiplied by 7x in 2020, going from US$ 5 billions to US$ 35 billions.
Source: https://www.algorand.com/resources/blog/stablecoins-for-banks-and-fintechs
The on-chain volume of stablecoins on January/21 almost double in relation to December, growing from US$ 178 billion to US$ 308 billion.
Source: https://www.theblockcrypto.com/linked/93809/stablecoin-on-chain-volume-january
According to the Cambridge University study, stablecoins are one of the most promising trends in crypto.
Besides fiat stablecoins, there are also commodity stablecoins, and can emerge other types in the future.
Retail investors can also have a positive impact on stablecoins increasing the demand for them. Some reasons for the growing interest in stablecoins are the Pandemic crisis and the devaluation of emerging market currencies. Stablecoins can be used for applications such as eCommerce, payments, and remittances, and in the DeFi sector.
Algorand and Solana are networks that can have a greater utilization with this trend of stablecoins. But it is not clear to me how they will capture this value and if it is not reflected in the price yet.
The risk for stablecoins is the regulation and competition from Central Banks Digital Currencies. Meanwhile, they are being used for transfers and can represent a complement for Litecoin to solve transfers and remittance needs. However, I think Litecoin as a scarce currency provides extra value to holders. Moreover, Litecoin may have upside in value, while stablecoins do not.
Please feel free to leave your comments and feedback below. See you in the next letter!
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